BILL NUMBER: AB 2503	CHAPTERED  09/12/00

	CHAPTER   411
	FILED WITH SECRETARY OF STATE   SEPTEMBER 12, 2000
	APPROVED BY GOVERNOR   SEPTEMBER 11, 2000
	PASSED THE ASSEMBLY   AUGUST 21, 2000
	PASSED THE SENATE   AUGUST 18, 2000
	AMENDED IN SENATE   JULY 6, 2000
	AMENDED IN ASSEMBLY   MAY 1, 2000
	AMENDED IN ASSEMBLY   APRIL 10, 2000

INTRODUCED BY   Assembly Member Steinberg
   (Coauthor:  Assembly Member Longville)

                        FEBRUARY 24, 2000

   An act to amend Sections 14400, 14405, 14800, 14860 of, and to
repeal Sections 14864 and 15256 of, the Financial Code, and to amend
Section 1648 of the Insurance Code, relating to financial
institutions, and declaring the urgency thereof, to take effect
immediately.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 2503, Steinberg.  Financial institutions:  electronic contract
formation:  credit unions.
   (1) Existing law specifies the accounts which make up the equity
capital of a credit union.
   This bill would revise what makes up the equity capital of a
credit union by also permitting the Commissioner of Financial
Institutions to approve the inclusion of other forms of capital not
specified.
   (2) Existing law permits a credit union to become a member of any
organization or organizations composed of credit unions, credit
associations, or chambers of commerce.
   This bill would additionally permit a credit union to become a
member of any organization or organizations composed of financial
institutions or nonprofit organizations.
   (3) Existing law permits a credit union to admit to membership
those persons qualified for membership upon the occurrence of either
the payment of an entrance fee or upon the purchase of one or more
shares in the credit union.
   This bill would also permit a credit union to admit to membership
those persons who purchase a membership in the credit union as
provided in the credit union's bylaws.
   (4) Existing law permits a credit union to issue shares in a
revocable trust when the settlor is a member of the credit union
issuing the shares in his or her own right.
   This bill would provide that for a trust that has joint settlers,
who are husband and wife, that only one settlor need be a member of
the credit union.
   (5) Existing law provides that the shares and certificates for
funds received of members of any credit union and all the
accumulation on those shares and certificates are exempt from
enforcement of a money judgment in the amount and in the manner
provided in specified provisions of the Code of Civil Procedure that
relate to exemptions.
   This bill would repeal that provision.
   (6) Existing law exempts credit unions from franchise and income
taxes.  Existing law provides that for the purpose of taxation
pursuant to the Bank and Corporation Franchise Tax Law, the corporate
existence of any credit union is terminated at the time of the
filing of a certificate of election to dissolve with the Secretary of
State.
   This bill would repeal the provision of law specifying when the
corporate existence of any credit union is terminated for purposes of
the Bank and Corporation Franchise Tax Law.
   (7) Existing law provides that an unincorporated association or
nonprofit corporation that is not the holder of a certificate of
authority issued to motor clubs under specified provisions of the
Insurance Code is not eligible for an insurance broker or agent
production license unless each member thereof possesses an individual
license to transact each class of insurance authorized by the
license or is a natural person named on the license to transact
thereunder.
   This bill would exempt any state chartered credit union from the
above requirements, except that it would require any officer,
director, or employee of a state chartered credit union who transacts
insurance to be licensed.
   (8) This bill would declare that it is to take effect immediately
as an urgency statute.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 14400 of the Financial Code is amended to read:

   14400.  (a) The savings capital of a credit union shall consist of
the payments made by members on shares as set forth in the credit
union's written savings capital structure policy pursuant to Section
14862.
   (b) The equity capital of the credit union shall consist of the
credit union's regular reserve account, the undivided earnings
account, any appropriated undivided earnings accounts, and other
forms of capital approved by the commissioner.
  SEC. 2.  Section 14405 of the Financial Code is amended to read:
   14405.  Every credit union may:
   (a) (1) Become a member of any organization or organizations
composed of credit unions, credit associations, chambers of commerce,
or financial institutions.
   (2) Become a member of any nonprofit organization approved by the
board of directors.
   (b) Pay dues and assessments as may be levied upon it by any
organization of which it is a member.
  SEC. 3.  Section 14800 of the Financial Code is amended to read:
   14800.  (a) Every credit union may admit to membership those
persons qualified for membership upon the occurrence of any of the
following:
   (1) Upon the purchase of a membership in the credit union as
provided in the credit union's bylaws.
   (2) Upon the payment of an entrance fee established from time to
time by the board of directors.
   (3) Upon the purchase of one or more shares in the credit union as
provided in the credit union's bylaws.
   (b) No officer, director, committee member, or employee of any
credit union shall approve a person for admission to membership or
admit an applicant for membership in the credit union or extend any
benefit or service of the credit union to any person, unless that
person is admitted to membership in the credit union pursuant to
subdivision (a).
   (c) Nothing in subdivisions (a) and (b) shall be construed to
limit the powers of a credit union to engage in joint service
programs or business relationships for the benefit of their members
where some incidental benefit may flow to third parties to the
transaction or the authority for a credit union to engage in joint
loan programs pursuant to Section 14959.
   (d) Nothing in this section prohibits a credit union from
admitting to membership a corporation in which the credit union holds
shares pursuant to Section 14650 or a corporation formed to provide
services to credit unions or to credit union members in which the
credit union holds shares or a limited liability company formed to
provide services to credit unions or to credit union members in which
the credit union holds membership or economic interests pursuant to
Section 14651.
  SEC. 4.  Section 14860 of the Financial Code is amended to read:
   14860.  Except as provided in this section and Part 2 (commencing
with Section 5100) of Division 5 of the Probate Code, no credit union
shall exercise trust powers except upon qualifying as a trust
company pursuant to Division 1 (commencing with Section 99).
   (a) Notwithstanding any other provisions of law relating to trusts
and trust authority, subject to the regulations of the commissioner,
a credit union may act as a trustee or custodian, and may receive
reasonable compensation for so acting, under any written trust
instrument or custodial agreement created or organized in the United
States which is a part of a pension plan for its members or groups or
organizations of its members, which qualifies or has qualified for
specific tax treatment under Section 401, 408, 408A, 457, or 530 of
the Internal Revenue Code, Title 26 of the United States Code, or any
deferred compensation plan for the benefit of the credit union's
employees, provided the funds received pursuant to these plans are
invested as provided in Section 16040 of the Probate Code.  All funds
held by a credit union as trustee or in a custodial capacity shall
be maintained in accordance with applicable laws and rules and
regulations as may be promulgated by the Secretary of Labor, the
Secretary of the Treasury, or any other authority exercising
jurisdiction over the trust or custodial accounts.  The credit union
shall maintain individual records for each participant or beneficiary
that show in detail all transactions relating to the funds of each
participant or beneficiary.
   The trust instrument or agreement shall provide for the
appointment of a successor trustee or custodian by a person,
committee, corporation, or organization other than the credit union
or any person acting in his or her capacity as a director, employee,
or agent of the credit union, upon notice from the credit union or
the commissioner that the credit union is unwilling or unable to
continue to act as trustee or custodian.
   (b) Shares may be issued in a revocable or irrevocable trust
subject to the following:
   (1) When shares are issued in a revocable trust, the settlor shall
be a member of the credit union issuing the shares in his or her own
right.  If the trust has joint settlers, who are husband and wife,
then only one settlor need be a member of the credit union.
   (2) When shares are issued in an irrevocable trust, the settlor or
the beneficiary shall be a member of this credit union in his or her
own right.  For purposes of this section, shares issued pursuant to
a pension plan authorized by this section shall be treated as an
irrevocable trust unless otherwise indicated in rules and regulations
issued by the commissioner.
   (3) This subdivision does not apply to trust accounts established
prior to the effective date of this subdivision.
  SEC. 5.  Section 14864 of the Financial Code is repealed.
  SEC. 6.  Section 15256 of the Financial Code is repealed.
  SEC. 7.  Section 1648 of the Insurance Code is amended to read:
   1648.  (a) An unincorporated association or nonprofit corporation
that is not the holder of a certificate of authority issued pursuant
to Chapter 2 (commencing with Section 12160) of Part 5 of Division 2
is not eligible for a license under this article unless each member
thereof possesses an individual license to transact each class of
insurance authorized by the license or is a natural person named on
the license to transact thereunder.
   (b) This section is not applicable to any nonprofit cemetery
company exempt from the taxes imposed by Part 11 (commencing with
Section 23001) of Division 2 of the Revenue and Taxation Code under
the provisions of Section 23701c of the Revenue and Taxation Code.
   (c) This section is not applicable to any state chartered credit
union, except that any officer, director, or employee of the credit
union who transacts insurance shall be licensed pursuant to this
article.
  SEC. 8.  This act is an urgency statute necessary for the immediate
preservation of the public peace, health, or safety within the
meaning of Article IV of the Constitution and shall go into immediate
effect.  The facts constituting the necessity are:
   In order to ensure the validity of the increasing number of
account agreements or loan agreements entered into through electronic
commerce, and to provide credit unions with necessary authority to
service their present and future customers, it is necessary that this
act take effect immediately.
